Medicare to increase hospital rates by 3.2%

23 procedures move to APC list

Hospital-based outpatient surgery departments will receive a 3.2% inflation update in Medicare payment rates in 2006 under a proposed Outpatient Prospective Payment System (OPPS) rule from the Centers for Medicare & Medicaid Services (CMS).

However, when hospitals factor in cuts in payments for drugs and other items required by the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (MMA), the actual increase is 1.9%, "less than inflation," says Roslyne Schulman, senior associate director for policy at the American Hospital Association in Washington, DC.

Underfunding for Medicare patients

"Our general concern is that the entire OPPS system continued to be underfunded," she says. "It only pays 87 cents for every dollar of care provided to Medicare beneficiaries."

For calendar year 2006, CMS proposes to remove 25 procedures from the inpatient list and assign 23 of the —, including nasal/sinus endoscopy (HCPCS 31293 and 31294) — to ambulatory payment classifications (APCs). (See list.)

The agency is not adding two anesthesia procedures for which a separate payment is not made under OPPS. Those procedures are anesthesia for procedure in lumbar region; chemonucleolysis (CPT 00634) and anesthesia for obturator neurectomy; intrapelvic (CPT 01190).

CMS annually reviews items within an APC group to determine if the median of the highest cost item in a group is more than two times greater than the median of the lowest cost item in that group.

This often is referred to as the "two-times rule." CMS is reassigning 58 HCPCS codes, including proctosigmoidoscopy (from 0146 and 0147 to 0428), sigmoidoscopy (from 0147 to 0146), and laser treatment of retina (from 0237 to 0672).

CMS also has proposed changing the criteria for establishing new pass-through device categories to include items that are surgically inserted or implanted either through a natural orifice or a surgically created orifice, as well as those that are inserted through a surgically created incision.

The proposed rule was published in the July 25, 2005, Federal Register.

Comments will be accepted until Sept. 16, 2005, and a final rule is scheduled to be published by Nov. 1, 2005.


For information on the proposed rule, contact:

  • Rebecca Kane, Centers for Medicare & Medicaid Services, Baltimore. Phone: (410) 786-0378.

To view the proposed regulation, go to and click on "CMS-1501-P." In commenting, please refer to file code CMS-1501-P. You may submit comments to Attachments should be in Microsoft Word (preferred), WordPerfect, or Excel. You may submit written comments (one original and two copies) by mail to Centers for Medicare & Medicaid Services, Department of Health and Human Services, Attention: CMS-1501-P, P.O. Box 8016, Baltimore, MD 21244-8018.